Alan S. Trust, United States Bankruptcy Judge.
Currently pending before the Court is a motion for relief from the automatic stay filed by a mortgage servicer, seeking to return to state court to continue a foreclosure action relating to Debtor Joann Kolnberger's ("Debtor") principal residence (the "Motion"). Debtor filed an objection (the "Objection") and has also filed an adversary proceeding against the mortgage servicer and others for alleged violations of state and federal law arising from denials of her requests to modify her mortgage.
The Motion and Objection present two novel issues: (1) Debtor's claim that, under the federal Real Estate Settlement Procedures Act ("RESPA"), a mortgage servicer cannot seek stay relief to continue a state court foreclosure action if the debtor has submitted a non-bankruptcy loss mitigation request to it, and may not pursue stay relief until the loss mitigation process has concluded, including any applicable appeals
For the reasons herein, the Motion is granted and Debtor's Objection is overruled; the adversary proceeding will be separately addressed in due course.
This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (G) and 1334(b), and the
This decision constitutes the Court's findings of fact and conclusions of law in accordance with Rules 7052 and 9014 of the Federal Rules of Bankruptcy Procedure.
In 2006, Debtor and co-obligor Michael Kolnberger ("Co-Debtor") executed a note in favor of First Financial Equities, Inc. in the amount of $456,000, secured by a mortgage against real property located at 106 Park Hill Avenue, Massapequa, NY 11758 (the "Loan" and the "Property"). The Loan was modified in 2009, creating a new principal balance of $462,140.85.
In 2015, Deutsche Bank National Trust Company, as trustee, on behalf of the holders of the Impac Secured Assets Corp., Mortgage Pass-Through Certificates Series 2006-4 ("DBT") commenced a foreclosure action against Debtor and Co-Debtor in Nassau County, New York, under Index Number 15-007128 (the "Foreclosure Action").
On June 11, 2018, DBT obtained a judgment of foreclosure and sale (the "Judgment of Foreclosure"). A foreclosure auction of the Property was scheduled for September 4, 2018; that sale was stayed by Debtor filing this bankruptcy case under chapter 13 of the Bankruptcy Code on August 31, 2018.
Marianne DeRosa was appointed the Chapter 13 Trustee (the "Trustee").
In her bankruptcy petition and schedules, Debtor claims the Property as her residence, with an ascribed value of $475,000, secured by a mortgage in favor of Select Portfolio Servicing in the amount of $583,066.93. [dkt items 1, 4] Debtor identified the Foreclosure Action in her schedules.
On August 31, 2018, Debtor filed her chapter 13 plan (the "Plan"), in which, inter alia, she proposes to request a loan modification of the Loan secured by the Property. Her Plan provides that her pre-petition mortgage arrears of $166,686 will be capitalized into the outstanding principal balance, resulting in a new principal balance of $583,066, to be paid at 4% interest over 40 years, resulting in a monthly mortgage payment of $3,456 per month, including interest and escrow payments of $1,020. [dkt item 6] The Plan has not been confirmed. DBT objected to confirmation of the Plan. [dkt items 15, 40]
On December 24, 2018, Select Portfolio Servicing Inc., as servicer for DBT ("SPS"; however, for purposes of this decision SPS will also be referred to as "DBT" unless the context requires otherwise) filed its Motion seeking stay relief under 11 U.S.C. § 362(d)(1) and/or (2) and relief from the co-debtor stay of § 1301(a) to continue the Foreclosure Action. [dkt item 23] The Motion alleges, inter alia, that the Loan balance has increased to $577,181.26, interest is accruing at 5.25% per year, that the Property had a value of $485,000 as of September 2018, and that Debtor has failed to make post-petition monthly mortgage payments of approximately $3,783.49 per month. DBT gave Debtor notice of a hearing set for January 31, 2019.
On January 25, 2019, DBT filed a response, arguing essentially that Debtor's defenses pursuant to RESPA should be precluded under the doctrines of Rooker-Feldman, res judicata, and collateral estoppel because the state court in the Foreclosure Action denied Debtor's similar arguments in connection with DBT's denial of loan modification requests submitted by Debtor prior to entry of the Judgment of Foreclosure. Additionally, DBT asserts that RESPA does not have any bearing on the determination of whether cause exists to lift the automatic stay under § 362(d)(1),(2), that Debtor's pre-petition arrears to DBT total $166,645.82 and that DBT is not adequately protected. [dkt item 28]
On January 28, 2019, Debtor filed an adversary proceeding against DBT, SPS, and Bank of America NA, seeking damages for alleged pre and post-petition RESPA and New York state law violations in connection with Debtor's various requests for loan modifications (the "Adversary"). [adv. pro. no. 19-8021; dkt item 1]
The Court held the hearing on the Motion on January 31, 2019. Part of the arguments concerned the allegations made in
On February 14, 2019, and corrected on February 15, 2019, Debtor filed a memorandum of law, in which she asserts that she has a right of setoff against DBT based on the alleged RESPA and state law violations being pursued in the Adversary, which she estimates to be worth $750,000. Debtor also asserts that DBT is violating a servicer participation agreement ("SPA") that SPS entered into with Federal National Mortgage Association, a federally chartered corporation, as financial agent of the United States ("Fannie Mae"), in which SPS agreed to participate in, among other things, the Home Affordable Modification Program ("HAMP"), which as part of the Emergency Economic Stabilization Act of 2008 was intended to, among other things, make foreclosure prevention services available to the marketplace.
On February 14, 2019, DBT filed its supplemental memorandum of law, asserting that Debtor has failed to establish that an alleged violation of RESPA is a defense to a motion for relief from the automatic stay for cause. Additionally, DBT asserts that RESPA's prohibition of "dual tracking" does not prohibit a servicer from seeking stay relief because a motion for stay relief is not one of the expressly prohibited acts under 12 C.F.R. § 1024.41(g).
On February 28, 2019, the Court held an adjourned hearing and then took the Motion on submission, but allowed the parties to file a letter identifying specific cases that were discussed at the February 28 hearing.
On March 1, 2019, Debtor filed a letter with citations to additional cases. [dkt item 39] DBT filed a letter in response. [dkt item 41]
RESPA is a broad remedial statute enacted by Congress to protect consumers from unnecessarily high settlement charges and other abusive practices in the real estate settlement process. 12 U.S.C. § 2601(a). McCann v. Rushmore Loan Mgmt. Servs., LLC, No. 15-CV-6502, 2017 WL 1048076, at *3 (E.D.N.Y. Mar. 16, 2017); Farber v. Brock & Scott, LLC, No. TDC-16-0117, 2016 WL 5867042, 2016 U.S. Dist. LEXIS 139574 (D. Md. Oct. 6, 2016); He v. Ocwen Loan Servicing, LLC, No. 15-CV-4575 (JS), 2016 WL 3892405 (E.D.N.Y. July 14, 2016). As the Farber court noted, § 2605, which governs the servicing of mortgage loans, provides that "`[a] servicer of a federally related mortgage shall not ... fail to comply with any ... obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter.'" 2016 WL 5867042, *3, 2016 U.S. Dist. LEXIS 139574, *7 (quoting 12 U.S.C. § 2605(k)(1)(E)). That court went on to state that § 2605 further provides that "`[w]hoever fails to comply with any provision of this section shall be liable to the borrower,' including potentially for actual and statutory damages." Farber, 2016 WL 5867042, *3; 2016 U.S. Dist. LEXIS 139574, *7 (quoting 12 U.S.C. § 2605(f)(1)).
Much of RESPA is implemented under the regulations promulgated by the Consumer Financial Protection Bureau ("CFPB"), and known as Regulation X ("Reg X"), found at 12 C.F.R. §§ 1024.1-1024.41. Within these regulations, Subpart C is specifically directed to mortgage servicers, who are required to follow specified loss mitigation procedures established under 12 C.F.R. § 1024.41 for a mortgage loan secured by a borrower's principal residence. However, the enforcement and limitations subsection of 12 C.F.R. § 1024.41 expressly provides as follows:
12 C.F.R. § 1024.41(a). Pursuant to § 1024.41, a mortgage servicer "that receives a borrower's `complete loss mitigation application more than 37 days before a foreclosure sale' must evaluate the borrower for all loss mitigation options, provide the borrower with written notice of its options, if any, and notify the borrower in writing if its application has been rejected." Farber, 2016 WL 5867042, at *3, 2016 U.S. Dist. LEXIS 139574, at *7 (quoting 12 C.F.R. § 1024.41(c)-(d) (2016)). As
Reg X clearly prohibits servicers from taking certain actions when a complete loss mitigation request has been timely submitted. However, Reg X does not impose a blanket prohibition on all acts by the servicer once the loss mitigation request is submitted, and distinguishes between the types of actions that are prohibited during two distinct time periods. The first period is when a loss mitigation request is made before a foreclosure referral or when the borrower is less than 120 days delinquent on the loan. During that period of time, 12 C.F.R. § 1024.41(f) is applicable and provides that a servicer "shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process" unless the loss mitigation procedures are completed. The second period is when a loss mitigation request is made after a foreclosure referral but more than 37 days before a foreclosure sale is to be held. During that period, 12 C.F.R. § 1024.41(g) is applicable and, as noted, prohibits a servicer from filing a motion for "foreclosure judgment or order of sale, or conduct a foreclosure sale" until the applicable loss mitigation procedures are completed, which may include an appeal from the loss mitigation decision.
Here, Debtor does not dispute that her post-petition Modification Request was submitted after the first notice or filing in the Foreclosure Action; DBT had already obtained the Judgment of Foreclosure and scheduled a foreclosure sale prior to Debtor's Modification Request. Accordingly, the limitations provided for by 12 C.F.R. § 1024.41(f) are inapplicable to Debtor's arguments.
Thus, the first issue here is whether 12 C.F.R. § 1024.41(g) prohibits a mortgage servicer from seeking stay relief to return to the non-bankruptcy court foreclosure process after a previously scheduled foreclosure sale has been stayed by the bankruptcy filing, and the debtor has submitted a post-petition loss mitigation request; this Court concludes that it does not.
Debtor has not cited a single case holding that a mortgage servicer violates RESPA by seeking stay relief to continue a foreclosure action. "[F]iling a
Bankruptcy Code § 362(d)(1), (2) provide two relevant, alternate bases for relief from the automatic stay:
11 U.S.C. § 362(d)(1),(2).
As noted, the Reg X provision at issue here, 12 C.F.R. § 1024.41(g), expressly provides that if a borrower submits a loss mitigation application more than "37 days before a foreclosure sale," then "a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale" until the loss mitigation process is complete under the regulations. Debtor's reading of 12 C.F.R. § 1024.41(g) as limiting "the ability of a servicer to initiate foreclosure procedures once a borrower has submitted a complete loss mitigation application" is overly broad; § 1024.41(g) only limits a servicer from a motion for "foreclosure judgment or order of sale, or conduct[ing] a foreclosure sale." 12 C.F.R. § 1024.41(g). The automatic stay enjoins a lender or servicer or any other creditor from moving for foreclosure judgment or order of sale or conducting a foreclosure sale unless and until the bankruptcy court lifts the stay. However, an order lifting the stay is not the same as moving for a foreclosure judgment or an order of sale, or conducting a foreclosure sale; all of these acts occur under the auspices of a non-bankruptcy process, either through a judicial or a non-judicial proceeding governed by non-bankruptcy law; an order lifting the stay simply allows the parties to return to the non-bankruptcy process and for the servicer to then resume the foreclosure proceeding should it choose to do so. Thus, merely seeking relief from the injunctive effect of the automatic stay is not itself an act prohibited on the face of the applicable RESPA statute or the regulations promulgated thereunder.
Moreover, since Congress passed both the Bankruptcy Code and RESPA, if it
Further, if this Court were to accept Debtor's argument and read 12 C.F.R. § 1024.41(g) as prohibiting a servicer from seeking stay relief during the RESPA loss mitigation process, then the regulations promulgated in Reg X under RESPA might be in conflict with the Bankruptcy Code's provisions concerning stay relief; in that circumstance, this Court would need to determine whether "legislative statutes take precedence over conflicting administrative regulations." In re NextWave Pers. Commc'ns Inc., 244 B.R. 253, 276 (Bankr. S.D.N.Y.), subsequent mandamus proceeding sub nom. In re F.C.C., 208 F.3d 137 (2d Cir. 2000) (quoting Furlow v. United States, 55 F.Supp.2d 360, 364 (D. Md.
Additionally, several courts have found that neither RESPA nor Reg X provide borrowers with a defense to a mortgage foreclosure or a right to an injunction. Fed. Nat. Mortg. Ass'n v. Karastamatis, 52 Misc.3d 1007, 1009, 36 N.Y.S.3d 360, 362 (N.Y. Sup. Ct. 2016) (Reg X does not provide a mortgagor a right to obtain a stay of proceedings in foreclosure actions or to obtain a vacatur of or orders or judgments issued in such actions); Wells Fargo Bank, N.A. v. Han, 60 Misc.3d 1203(A) (N.Y. Sup. Ct. 2018) (same); Clark v. Ocwen Loan Servicing, LLC, No. 15-CV-659, 2015 WL 6159447, at *6 (W.D. Mich. Oct. 20, 2015) (RESPA does not provide for injunctive relief); Caggins v. Bank of New York Mellon, No. 15-11124, 2015 WL 4041350, at *2 (E.D. Mich. July 1, 2015)(there is no provision found in RESPA under which a mortgagor can seek to have foreclosure proceedings nullified); Roosevelt Cayman Asset Co. II v. Mercado, 259 F.Supp.3d 1, 5 (D.P.R. 2016); Ayala v. Pac. Coast Nat'l Bank, No. 16-CV-00723(ODW), 2016 WL 1700376, at *2 (C.D. Cal. Apr. 27, 2016) ("it does not appear that [] [RESPA] provides for injunctive relief, and therefore cannot be used to enjoin (even temporarily) the impending foreclosure"). Again, it would be at odds with RESPA and the Bankruptcy Code to hold that while RESPA does not provide for injunctive relief, a RESPA violation could be utilized as a basis to deny a creditor relief from the injunctive effect of the stay. Moreover, Debtor does not seek injunctive relief in her Adversary.
Accepting Debtor's argument also departs from the inherent nature of stay litigation. As this Court has previously stated, "Congress intended that stay relief litigation be summary in fashion and expeditious in time. This is due in part to the stay being an injunction imposed by the mere filing of a bankruptcy case, and the recognition that granting stay relief returns the parties to the auspices of a court of competent jurisdiction to determine, on the merits, the relative rights, liabilities and responsibilities of the parties. Congress manifested this intention, in part, by requiring that stay relief motions be heard and determined within thirty days from filing of the motion, unless the court determines within such thirty days that the party opposing stay relief has demonstrated a `reasonable likelihood' that it will prevail at the conclusion of a final hearing; such a final hearing is to then be held within thirty days thereafter. 11 U.S.C. § 362(e)." In re Escobar, 457 B.R. 229, 236 (Bankr. E.D.N.Y. 2011); accord In re Sterling, Case No. 14-12608-shl, 2018 WL 313085 (Bankr. S.D.N.Y. Jan. 5, 2018).
In order to hear and determine whether RESPA or Reg X suspends seeking stay relief, this Court might need to rapidly determine, inter alia, a number of statutory and factual issues under those laws and regulations, which have no bearing on cause, the lack of adequate protection, the debtor's equity in the property and the necessity of the property to an effective reorganization of the debtor. These include:
Whether the party seeking stay relief is a servicer, which is defined as "the person responsible for servicing of a loan," with "servicing," in turn, defined as "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan ... and making payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan." 12 U.S.C. § 2605(i)(2)-(3); Farber, 2016 WL 5867042, at *3, 2016 U.S. Dist. LEXIS 139574, at *9.
Whether a "complete loss mitigation application" had been submitted and if so when. See Gresham v. Wells Fargo Bank, N.A., 642 F. App'x 355, 359 (5th Cir. 2016) (footnote omitted); He, 2016 WL 3892405 at *2.
Whether, if Debtor asserts the servicer is at fault for not having received a complete application, the servicer has exercised "reasonable diligence in obtaining documents and information to complete a loss mitigation application." 12 C.F.R. § 1024.41(b)(1).
Whether the servicer has properly "evaluate[d] the borrower for all loss mitigation options...." Farber, 2016 WL 5867042, at *3, 2016 U.S. Dist. LEXIS 139574, at *7; and
Whether the mortgage at issue was executed incident to a personal loan; "RESPA does not apply to `[b]usiness purpose loans,'" 12 C.F.R. § 1024.5(a)-(b). Sylvester v. Interbay Funding LLC, No. 15-CV-1736
Congress did not provide or intend that these issues be heard and determined in the context of a summary lift stay proceeding that is to be completed within sixty days. As noted, Debtor seeks $750,000 of RESPA damages and asserts a right of setoff against her Loan obligations in such amount. Congress did not provide that this Court should determine the viability of this setoff claim in the summary context of lift stay litigation. Further, Debtor seeking affirmative relief in the context of this stay dispute violates Bankruptcy Rule 7001, which requires affirmative relief of this type to be sought through an adversary proceeding. See Rule 7001(1)(adversary proceeding required for a proceeding to recover money or property).
Debtor seeks to use RESPA as both a shield against the stay relief Motion being considered and a sword to seek damages. All of Debtor's state and non-bankruptcy federal law claims and DBT's defenses thereto can be tried and determined in accordance with ordinary litigation processes in the Adversary. As the district court for the Eastern District of New York and other courts have noted, "[b]orrowers have a private right of action to enforce the procedural requirements set forth in § 1024.[41]. The remedies available are set forth in section 6(f) of RESPA, which provides for the recovery of monetary damages in the amount of `(A) any actual damages to the borrower as a result of the failure; and (B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $2,000.'" McCann, 2017 WL 1048076, at *3 (internal citations omitted); see also He, 2016 WL 3892405 at *2 (dismissing a claim under NY Gen. Bus. Law # 349 on a Rule 12(b)(6) motion but not dismissing borrower's RESPA claim).
Debtor incorrectly relies on In re Coppola, 596 B.R. 140 (Bankr. D.N.J. 2018). First, Coppola was decided in the context of an adversary proceeding, not a lift stay motion. Second, the Coppola debtor did not challenge a loss mitigation denial as a RESPA violation; she sued claiming the servicer failed to properly respond to a notice of error under 12 C.F.R. § 1024.35. Third, while Coppola acknowledges that RESPA does not establish a specific loss mitigation protocol, it does require mortgage servicers to specify reasons for the denial of a loss mitigation request so that the borrower is aware of the information used by the servicer in declining a specific option so the borrower can decide whether to appeal the denial, and, if so what issues the appeal should address. Coppola, 596 B.R. at 154-55, 164-65.
Debtor also relies on Nash v. PNC Bank, N.A., TDC-16-2910, 2017 WL 1424317 (D. Md. April 20, 2017) which is not a bankruptcy case. Nash addressed whether a modification denial letter concerning a HAMP loan that simply refers to investor guidelines as not giving the servicer the authority to modify a loan or offer the requested alternative to foreclosure constitutes a violation of 12 C.F.R. § 1024.41(d). In denying a Rule 12(b)(6) motion to dismiss a RESPA violation claim that the lender failed "to provide sufficient detail about the reasons for the denial," the Nash court noted that "[f]ew courts have considered the scope of 12 C.F.R. § 1024.41(d) and what specifically must be provided to a borrower whose application for a loan modification is denied." Id. at *3.
Finally, DBT's reliance on Sterling is also misplaced. While the pro se debtor
As noted, Debtor has neither cited a case, nor has this Court found one, that holds that an alleged RESPA violation is a valid basis to deny stay relief.
DBT asserts that its state court Judgment of Foreclosure precludes any pre-judgment RESPA violation claims as a violation of the Rooker-Feldman doctrine. See generally Hoblock v. Albany Cnty. Bd. Of Elections, 422 F.3d 77, 84 (2d Cir. 2005) (Rooker-Feldman doctrine provides that "federal district courts lack jurisdiction over suits that are, in substance, appeals from state-court judgments.") In the Foreclosure Action, Debtor opposed DBT's motion for judgment and sale, asserting that DBT violated various RESPA and New York laws in connection with a loss mitigation request made by Debtor in or around 2016, which is also the subject of the Adversary.
As noted above, Bankruptcy Code § 362(d)(1), (2) provide two alternate bases for relief from the automatic stay: under (d)(1) for cause, or under (d)(2) if (A) the debtor does not have an equity in such property; and (B) such property is not necessary to an effective reorganization. 11 U.S.C. § 362(d)(1),(2). Because these bases for lifting the stay are expressed in the disjunctive, "if the court finds that the debtor has no equity in the property and that such property is not necessary to an effective reorganization, it is not necessary to consider the alternate basis for relief from the stay, e.g., whether the secured creditor lacks adequate protection." In re Zeoli, 249 B.R. 61, 63 (Bankr. S.D.N.Y. 2000) (if any one subsection applies, the Court must grant a motion for relief from stay.); In re Leonard, 151 B.R. 639, 643 (Bankr. N.D.N.Y. 1992).
Courts have broad discretion in granting stay relief. In re Bennett Funding Group, Inc., 212 B.R. 206, 211 (2d Cir. 1997) (citing Manhattan King David Restaurant, Inc. v. Levine, 163 B.R. 36, 40 (S.D.N.Y. 1993)); Sterling, 2018 WL 313085 at * 5; In re Fierro, No. 1-14-41439-NHL,
The movant bears the initial burden of showing "cause" under § 362(d)(1). In re Mazzeo, 167 F.3d 139, 142 (2d Cir. 1999); Fierro, 2015 WL 3465753, at *4. If a sufficient showing is made, the burden shifts to the debtor to demonstrate that there is insufficient "cause" to modify the stay. In re Anton, 145 B.R. 767, 769 (Bankr. E.D.N.Y. 1992); Fierro, 2015 WL 3465753, at *4.
"The lack of adequate protection of an interest in property is one cause for relief, but is not the only cause." In re Sonnax Indus., Inc., 907 F.2d 1280, 1285 (2d Cir. 1990) (citing S.Rep. No. 989, 95th Cong., 2d Sess. 52, reprinted in 1978 U.S. Code Cong. & Admin. News 5787, 5838.) The Second Circuit has adopted a list of twelve factors (the "Sonnax Factors") to determine whether cause exists under § 362(d)(1) to lift the automatic stay to allow a stayed proceeding to continue in state court. Id. at 1286. They are:
See also Fierro, 2015 WL 3465753, at *4.
A movant need not satisfy every one of the twelve factors. Mazzeo, 167 F.3d at 143; In re Burger Boys, Inc., 183 B.R. 682, 688 (S.D.N.Y. 1994); Sterling, 2018 WL 313085 at *5. The court should weigh the particular circumstances of each case to reach the solution that is most just to all parties. In re Keene Corp., 171 B.R. 180, 183 (Bankr. S.D.N.Y. 1994).
Application of the Sonnax Factors weighs in favor of granting relief from the automatic stay to allow the adjudication of DBT's and Debtor's mortgage foreclosure claims. State law issues clearly predominate in the Foreclosure Action, which has been on going in state court since 2015 and was litigated to a judgment. Allowing the parties to continue the Foreclosure Action will not prejudice other creditors because there is no equity in the Property, as discussed below. Debtor's Adversary can proceed before this Court or the federal district court while DBT's Foreclosure Action proceeds in state court. The balance of harms in lifting the stay does not favor Debtor because, as discussed above, Debtor's RESPA claims do not provide Debtor with a right to injunctive relief against DBT to stay the foreclosure process, and it would be prejudicial to DBT to keep the stay in effect based on Debtor's RESPA violation claims when injunctive relief would not otherwise be available. Said otherwise, the "policies of the automatic stay would not be furthered by the continuation of that stay as a surrogate for a preliminary injunction." Grand Traverse, 150 B.R.
Stay relief should also be granted under 11 U.S.C. § 362(d)(2), under which "[a] creditor has the burden of establishing that the debtor has no equity in the property, the burden [then] shifts to the debtor to prove that the property is necessary to an effective reorganization." Thompson v. JP Morgan Chase Bank, N.A., No. 11-CV-2905 JFB, 2012 WL 739384, at *6 (E.D.N.Y. Mar. 8, 2012) (quoting 2670 West Ridge Road, LLC v. Real Estate Asset Purchase Corp., No. 10-CV-6095-CJS, 2010 WL 3516584, at *2 (W.D.N.Y. Sept. 3, 2010)). See 11 U.S.C. § 362(g). Here, there is no dispute that Debtor has no equity in the Property; Debtor ascribed a $475,000 value to the Property and Debtor does not challenge the Loan balance of $577,181.26. See In re WORLDCOM, INC., No. 02-13533, 2003 WL 22025051, at *4 (Bankr. S.D.N.Y. Jan. 30, 2003)(debtor lacks equity in the property where the value of the property is less than the total amount of claims that the property secures.)
The Supreme Court has stated that a debtor's burden of proof that the property is necessary to an effective reorganization is "not merely a showing that if there is conceivably to be an effective reorganization, this property will be needed for it; but that the property is essential for an effective reorganization that is in prospect." United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 375-76, 108 S.Ct. 626, 633, 98 L.Ed.2d 740 (1988) (emphasis in original). The Court went on to state that "[t]his means, ... that there must be a reasonable possibility of a successful reorganization within a reasonable time." Id. (quotations and citation omitted). "`The test is one of feasibility. The debtor need not show that the plan is confirmable, but that the things which are to be done after confirmation can be done as a practical matter. A motion for relief from the stay should not be turned into a confirmation hearing; the debtor need only show that where there is lack of equity, the proposed plan has a realistic chance of being confirmed and is not patently unconfirmable.'" In re 347 Linden LLC, No. 11-CV-1990 KAM, 2011 WL 2971496, at *8 (E.D.N.Y. July 20, 2011) (quoting In re 160 Bleecker St. Assocs., 156 B.R. 405, 411 (S.D.N.Y. 1993) (citations omitted)). See also In re 300 Washington St. LLC, 528 B.R. 534, 553 (Bankr. E.D.N.Y. 2015). "The debtor's burden of demonstrating a reasonable possibility of a successful reorganization increases with time." In re Ritz-Carlton of D.C., Inc., 98 B.R. 170, 172 (S.D.N.Y. 1989).
Debtor acknowledges that she bears this burden, but she has failed to meet it. Debtor admits that she cannot confirm a chapter 13 plan without obtaining the loan modification she desires. Debtor has apparently been declined for a loan modification three times, for which she has now sued DBT. There is no evidence in the record from which this Court could find that she will likely be granted the modification she requires to confirm her Plan. Debtor's Plan proposes to pay
Debtor's offer to pay adequate protection while she litigates the Adversary to conclusion also fails. She seeks to pursue her Adversary to reduce or eliminate her mortgage balance without confirming a chapter 13 plan. Debtor stated she will seek to withdraw the reference of her Adversary and have it tried before the district court. If withdrawn, given the substantial demands on the dockets of the district court, it could easily be 2 to 3 years before the Adversary is tried, if it were not resolved on a dispositive motion. With appeals, the Adversary litigation process could conceivably stretch on for longer than the 60-month maximum under which Debtor could make payments under a confirmed plan. See 11 U.S.C. § 1322(d)(1)(C) (chapter 13 plan cannot exceed 5 years). This game plan does not fit within the contours of the chapter 13 process. See generally Grand Traverse, 150 B.R. 176 (confirmation of chapter 11 plan not reasonably in prospect given adversary proceeding concerning lender liability and fraud between parties required to be resolved before confirmation could proceed).
In any event, without a loan modification, the Plan payments are not sufficient to cure the $166,686 in pre-petition arrears and to keep the mortgage current post-petition as required pursuant to 11 U.S.C. § 1322(b)(3),(5) in order for the Court to confirm a plan. In re Lemma, 394 B.R. 315, 322 (Bankr. E.D.N.Y. 2008) ("The concept of `cure' under subsections (b)(3) and (b)(5) includes the power to de-accelerate a mortgage, pay out the prepetition arrears under a plan and reinstate the original payment schedule.")(citing In re Taddeo, 685 F.2d 24, 26, 27 (2d Cir. 1982)).
Accordingly, because Debtor cannot demonstrate that she is likely to obtain the loan modification she desires and requires to confirm a plan, stay relief should also be granted under § 362(d)(2).
DBT seeks relief from the co-debtor stay imposed by § 1301(a) of the Bankruptcy Code, asserting that such relief is warranted under § 1301(c). Under § 1301(a) of the Bankruptcy Code, a creditor is stayed from pursuing a Chapter 13 debtor's co-obligor until the Chapter 13 case is "closed, dismissed, or converted to a case under chapter 7 or 11 of this title." 11 U.S.C. § 1301(a)(2). Section 1301(c) of the Bankruptcy Code provides:
11 U.S.C. § 1301(c).
In Lemma, the court denied the creditor's motion for relief from the co-debtor stay under § 1301(c)(2) where the debtor had confirmed a plan that would pay the creditor's claim over the life of the plan. 394 B.R. at 321-22. Here, there is no dispute that Debtor has not proposed a plan that will pay DBT's claim over the life of the Plan. "`If the full debt is not paid through the plan, creditors are not forced to wait until the plan is complete to receive the money they are unquestionably owed from cosigners' and relief from the codebtor stay is appropriate.'" Lemma, 394 B.R. at 321 (quoting Southeastern Bank v. Brown, 266 B.R. 900, 908 (S.D. Ga. 2001)). Thus, relief from the co-debtor stay is also warranted.
Accordingly, it is hereby
Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X), 78 Fed. Reg. 10696-01, 10897-98 (Feb. 14, 2013). Additionally, several courts that have interpreted RESPA, including the Eastern District of New York, have looked to the CFPB's comments for guidance. He, 2016 WL 3892405, at *2. See generally In re Addison, 580 B.R. 24, 30, 32 (Bankr. E.D.N.Y. 2018) (in a case involving the presumption of abuse under Bankruptcy Code Section 707(b), and following the plain meaning approach to the Code and the Means Test, "the Court finds its guidance in Form 122A-2 and the Local Standards", and not in the Internal Revenue Service manual in the chapter entitled Financial Analysis Handbook.)
